photo © Nigel Howard
LONDON’S CHRISTMAS ECONOMY
A business perspective on the retail and hospitality sectors
Press & Public Affairs
London Chamber of Commerce and Industry
December 2005
LONDON’S CHRISTMAS ECONOMY
A Business Perspective on the Retail and Hospitality Sectors
Press & Public Affairs
London Chamber of Commerce and Industry
December 2005
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The London Chamber of Commerce has 10,000 business customers across the
capital, ranging in size from multi-national companies such as BT and Thames Water
to sole traders.
Without exception, our policies are always informed by the experiences of our
member companies. The objective is to ensure that the private sector in London,
which is the principal engine of the national economy, is able to operate on a level
playing field, free from unnecessary hindrance from bureaucrats and politicians alike.
It is only by putting London’s businesses first that the capital can maintain its
outstanding record for creating well-paid jobs, leading the world in service provision
and being Europe’s favourite location for foreign direct investment.
For further information or to discuss this report, please contact:
Dan Bridgett, director of press & public affairs
London Chamber of Commerce and Industry, 33 Queen Street, London EC4R 1AP
(T: 020 7203 1897 or email: [email protected])
This report was researched and compiled by:
Dr Helen Hill, press & public affairs manager (T: 020 7203 1882 or e-mail:
[email protected])
James Ford, senior press & public affairs executive (T: 020 7203 1889 or e-mail:
[email protected])
James Heal, press & public affairs executive (T: 020 7203 1829 or e-mail:
[email protected])
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Index
Executive Summary
6
Introduction: The Christmas Economy
8
The View from the High Street
9
The Significance of Retail in London
The Ghost of Christmas Past?
Christmas on Credit
E-Christmas: The Rise of Online Shopping
The Outlook for Winter 2005: Retail Confidence
What is Affecting Retail Performance on the High Street
Marketing Christmas
Late Night Shopping
Leisure, Tourism and Hospitality
16
Christmas Outlook: 2005
The Office Christmas Party
Marketing and Promotion
Policy Agenda: What London Businesses Want for Christmas
21
Conclusion
22
Appendix 1: Office Christmas Parties Survey 2005
24
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Hamleys, Eva Saltman, public relations manager
“Based on the last couple of weeks it’s looking very good indeed…the Christmas
Lights switch on was very well attended.”
“Unseasonally warm weather isn’t conducive to people feeling in the mood for
Christmas shopping but the recent cold snap has helped.”
Cartier, Jean-Francois Berger, New Bond Street store manager
“We are pretty confident even though the economy doesn’t seem to be booming.
During harder times I think people revert back to the names they can trust.”
The Body Shop, Jessica Patel, Oxford Street store manager
“Two months ago, we weren’t confident [but] coming up to Christmas we are
achieving sales targets.”
Wedgwood, Colette Zakil, Regent Street general manager
“We need to encourage people into the West End and particularly into Regent Street
which gets less coverage than Oxford and Sloane streets.”
“the congestion charge is a problem… a lot of people are shopping out of the West
End”
Harvey Nichols, Gill Toal, human resources director
“We are out of the c-charge but we are against being taken into the zone. People do
not need more obstacles to come into London.”
Lalique, Frederick Fischer, Sloane Street retail manager
“I think the bombing is only one of the things causing the downturn in business.”
Rules Restaurant, Richard McMenemy, managing director
“Everything took a knock in July but a bumper Christmas is expected in the sector.”
Porsche Design, Denise Davis, New Bond Street store manager
“People are coming in on a Sunday now because of the free parking and the belief
that they will be safer.”
West End-based retail manager
“the recent pedestrianisation of our street has brought us a lot of new customers.”
Elliot Rhodes Ltd, Justin Rhodes, managing director
“In general shopping after 6.30pm is sporadic but worthwhile. In this area there are
many people around pre-dinner, pre-theatre etc…and even if they are not buying
they do come in and look which brings them back in the future.”
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City-based retail manager
Late night shopping is “not as important as early morning. People are willing to come
in earlier rather than staying out later after work.”
Berkeley Hotel, Thomas Kochs, food and beverages manager
“the hotel industry is closely linked to the success of business in general”.
Central London-based restaurateur
“the success of City workers… is the bedrock of our success”.
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Executive Summary
•
The London Chamber of Commerce conducted detailed telephone interviews
with more than 50 directors, proprietors and managers from retailers,
restaurants and hotels on the frontline of the capital’s Christmas economy.
•
Whilst there has been considerable media attention speculating about a bad
Christmas for retailers, this was not borne out by the results of the interviews
conducted.
•
Four-fifths of leisure businesses and two-thirds of retailers interviewed said
they were confident of a good Christmas for their business.
•
Very few retailers and just one leisure business had reduced staff numbers or
cancelled recruitment plans this Christmas.
•
Luxury and designer goods seemed to be performing particularly well this
year, probably due to the recent bumper bonus payouts in the City.
•
Perhaps influenced by the negative reporting in the press, businesses were
less confident about the outlook for their sector as whole. Four-fifths of
retailers and three-fifths of restaurateurs and hoteliers said they believed
other businesses were not doing as well as their own.
•
The major factor which the interviewees believed was affecting performance
was the July bombings. Half of retailers and two-thirds of leisure businesses
said that the terrorist attacks had impacted upon their business, most notably
by reducing the number of domestic and foreign tourists visiting central
London. However, most agreed that the worst was now behind them and that
business was stronger now than six to eight weeks ago.
•
Other factors affecting performance included the congestion charge, the
economic downturn and, in the case of retailers, the increased popularity of
alternative shopping destinations (both online and out of town).
•
Online shopping was identified as an increasingly important part of the
Christmas economy. Two-thirds of the retailers interviewed said that they
traded via the internet and none reported a drop in online sales.
•
Interviewees readily acknowledged the importance of Christmas to their
business, with many of them willing to say what proportion of their annual
turnover was generated by the festive season. Many retailers highlighted the
significance of late night and early morning shopping to their business in the
run-up to Christmas whilst a number of hospitality businesses identified the
boost to their takings that come from the office Christmas party season.
•
The majority of businesses said they were investing in marketing to promote
their business rather that offering sales or promotions which they had not
previously planned to hold.
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•
As a result of these detailed interviews, the London Chamber of Commerce is
making four policy recommendations:
o
Firstly, that the congestion charge should be suspended for the final
full week before Christmas, this year and every year, to encourage
shoppers, diners and revellers into central London in the most pivotal
trading week of the year. We believe that the Mayor has implicitly
conceded this point already by suspending the charge in the three
days after Christmas, thereby establishing the precedent of a chargefree West End during crucial shopping periods.
o
Secondly, that either central or regional government should provide
more training and support to retailers and hospitality businesses to
develop more advanced marketing skills to promote their business.
o
Thirdly, that urgent measures be put in place to help smaller,
independent retailers establish online trading.
o
Finally, that Visit London in conjunction with London retail groups,
should develop and promote the concept of weekday early morning
shopping in key areas such as the West End, Knightsbridge and the
City.
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1. Introduction: The Christmas Economy
Christmas is a significant economic event, impacting growth, employment, spending,
personal debt and consumer confidence. Many businesses rely on the Christmas
period to generate a substantial proportion of their annual turnover. A bad Christmas
can undo in six weeks the hard work and good management of the previous twelve
months.
The London Chamber of Commerce conducted detailed telephone interviews with
over 50 directors, proprietors and managers from retailers, restaurants and hotels on
the frontline of the capital’s Christmas economy to see how they were performing,
what factors were affecting their business, how they were promoting their business,
and how significant Christmas was to their turnover. Interviewees were drawn from
across central London, including the West End, Covent Garden, Knightsbridge, the
City and Canary Wharf.
The Economic Outlook this Christmas
The economic outlook for London this Christmas is much the same as it has been all
year – unpromising. The UK economy grew by just 0.4% during the third quarter of
2005, continuing the sluggish trend that has prevailed all year and the manufacturing
sector reported negative growth of 1.3%. While the housing market has stabilised
and there is optimism of continued growth in house prices in 2006 (even in London),
high oil prices, subdued consumer confidence and poor retail figures continue to
cause concern for analysts. Consumer price inflation has continued to rise and
remains above the 2% national target. According to GLA Economics: “The
combination of below trend growth for five quarters and above target inflation is
making interest rate decisions by the Bank of England tricky and may well mean that
interest rates are kept at 4.5% during the rest of this year.” (London’s Economy
Today, GLA Economics, October 2005)
With a lot of media attention focused on reports of doom and gloom on the high
street in recent months it would be easy to ignore or overlook some of the positive
economic indicators for the London economy this Christmas. If there is a silver lining
to the rather bleak macro-economic picture then it comes in the form of executive
pay. City bonuses this winter are predicted to be the most generous since the
dot.com boom of the late 1990s, with the investment bankers in the Square Mile
expected to receive up to 20% more than their Wall Street counter parts. The Office
of National Statistics (ONS) has also published figures which showed that average
earnings in Canary Wharf had now soared to £101,000 a year for men (compared to
£43,000 for women). This strong performance is likely to have a significant knock-on
effect for the retailers of luxury goods, as well as the proprietors of London’s more
exclusive bars and restaurants.
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2. The View from the High Street
The Significance of Retail in London
The retail sector is a vital part of the London and UK economies. Retail accounts for
10% of London businesses and employs 1 in every 11 workers in the capital. The
retail and wholesale sector is the third largest in the London economy, generating
£17 billion a year. The capital is home to 14% of all retail enterprises in the UK with
over 40,000 shops and some 80 individual markets. (Figures from the London Retail
Consortium)
London’s retail centre also plays a vital role in defining London’s image on the
national and international stage. In a You Gov poll for the Daily Telegraph in 2003,
98% of UK residents living outside London were able to identify Oxford Street as the
main shopping centre in the capital. This compares to just 44% of people who knew
where Buckingham Palace was and 47% who knew that the British Museum housed
the Elgin Marbles. In the same survey, 42% of non-Londoners agreed that London
was “a wonderful place to shop”. (YouGov London Survey, August 2003)
Christmas is a make or break period for retailers, with many relying on the festive
period for a significant part of their annual turnover. In Regent Street the average
spend per visit is £40 most of the year but rockets up to £62.50 in the pre-Christmas
period. An estimated 40 million shoppers visit Oxford Street each December, many
during the final two weeks of the year. Amongst the retailers surveyed by the London
Chamber of Commerce, Christmas accounted for an average of 30-40% of their
annual turnover, though with some noticeably above the median. The manager of
Porsche Design in New Bond Street said she expected weekly takings to double or
triple over the festive period whilst Fortnum and Mason estimated that Christmas
generated 80% of their corporate sales division’s annual turnover. According to GLA
Economics the majority of shoppers in the West End are infrequent visitors who
come into the area for a special trip, a specific item, or a special sale, most notably in
the pre-Christmas period. This makes the West End more dependent on Christmas
Shopping than any other retail centre in the capital. (GLA Economics, Retail in
London: Working Paper A – Retail in the West End, March 2005)
The Ghost of Christmas Past?
Christmas 2004 was a disappointing period for retail in the UK and London. The
Office for National Statistics (ONS) calculated that retail sales dropped 1% during
December 2004, making it the poorest Christmas sales performance since 1981. The
British Retail Consortium (BRC), which represents the UK’s major high-street
retailers, calculated that while over all sales rose 2.5% compared to December 2003,
the ‘like-for-like’ sales figures – the sector’s benchmark figure and that measure used
by City analysts – showed a fall. Kevin Hawkins, the BRC’s director general,
described it as “the worst Christmas for retailers in the last decade.” The
disappointing Christmas was attributed to a lack of consumer confidence resulting
from uncertainty over the economy and housing market. Many shoppers were
reluctant to commit to high value purchases with the home and furniture sectors hit
particularly badly, as evidenced by furniture store chain Courts which went into
administration.
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However, although a poor Christmas for retailers generally, December 2004 sales
were not as bad as expected. According to Helen Dickinson, head of retail at KPMG:
“the Christmas sales figures are disappointing for many retailers but do not show the
abysmal performance anticipated by some in the run-up to Christmas.” An analysis
by Grant Thornton UK LLP showed that the biggest slump in sales was suffered by
department stores whilst sales of electricals, fashion, food and drink and niche
retailers (which includes stores selling toys or DIY goods) saw the biggest growth.
Electricals received a particular boost from the popularity of flat screen TVs and MP3
players. (‘Predictions of slowdown in UK retail confirmed by Christmas trading
updates’, Grant Thornton LLP, January 2005)
Christmas on credit
The limited ‘good news’ enjoyed by some retailers last Christmas was largely funded
by a sharp rise in personal debt. According to Switch, over the festive period in 2004
the average person spent £813 on Christmas spending, including £337 on presents,
£100 on food, £56 on drink, £119 on going out and £84 on travel. MoneyWeek,
estimated that Britons borrowed £8.5bn last Christmas with about 15 million
borrowing on average £542 each to fund their spending. Over all, 2004 saw the
largest single-year increase in debt (£116bn) since the Bank of England was founded
in 1694.
The poor outlook for the UK economy – with rising oil prices, a stagnant housing
market, the London bombings and downgraded growth forecasts during 2005 – has
seen debt continue to rise. Total UK personal debt broke through the £1.1 trillion
barrier in June 2005 and by September average consumer borrowing via credit
cards, motor and retail finance deals, overdrafts and unsecured personal loans has
risen to £4,092 per average UK adult. This translates to a 10% increase on the
previous year’s levels and a 45% increase since 2000. According to Credit Action,
the national charity which promotes financial responsibility, Britain’s personal debt is
increasing by £1 million every four minutes.
Christmas is an expensive time of the year and the BRC has calculated that the
average family accumulates 18% of their annual borrowing in December by spending
twice as much as they do in any other month of the year. The Royal Bank of Scotland
estimates that 51% of Britons will use savings to cover part of their Christmas
spending. A recent poll by Moneyfacts showed that more than 25% of people intend
to borrow to pay for Christmas this year whilst another survey found that 80% of
people worry about the financial side of Christmas. The increased popularity of online
shopping has also impacted upon personal debt as 11p in every £1 spent on credit
cards is spent online. With personal debt levels already at an all-time high, many
consumers will face tough decisions over spending and borrowing this Christmas and
many may decide to opt for a low-cost Christmas.
E-Christmas: The rise of online shopping
E-commerce is an increasingly important factor in the Christmas economy. According
to the Interactive Media in Retail Group (IMRG), which represents online retailers, in
2004 half the UK population did some or all of their Christmas shopping online,
spending in excess of £3bn (6.8% of all UK retail sales). While high street sales were
up 2.5% on the previous year, online sales rose by 20%.
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Whilst 2005 has been a tough year for many stores, online sales have continued to
boom. Between January and September the e-retail growth rate doubled. The IMRG
Index, which is based on sales data from over 80 online retailers, reached a record
high value of 1867 in September 2005 with an estimated 24 million people shopping
online, spending an average of £67 each. The Organisation for Economic Cooperation and Development (OECD) recently rated the UK as one of world’s leading
economies for online commerce. Online transaction values for UK businesses
average 15% of overall turnover, second only to Ireland at 21%. According to an
analyst with Verdict Research: “The internet is more important than its physical size.
The way it differentiates between shops and encourages people to shop is having a
big impact on the market.” (‘Worry for retailers as web shopping clicks into place’,
Financial Times, 22 November 2005)
According to Jo Tucker, the IMRG’s managing director: “Many online retailers have
begun to invest seriously this year for the first time since the 2000 dot.bomb in
improving their offers, and are being rewarded with great results. Consumers, who
are now more savvy than ever before, are responding by increasing their demand for
the choice, convenience and value that internet shopping gives them, as indicated by
the IMRG Index reaching yet another all-time high.”
Those companies and brands that do not own or operate stores are becoming
increasingly important players within the retail sector. The ‘home shopping’ retailer
QVC and online bookstore Amazon.co.uk both featured in the Mintel chart of Top 250
European retailers in 2003/2004, ranking higher than well known high street brands
such as River Island, Mothercare and The Body Shop. Firebox.com, the online
gadgets and toy retailer, was one of Real Business’s ‘Hot 100’ Fastest Growing UK
Businesses and a finalist in the Retail Week Awards this year. Firebox has averaged
annual growth of over 69% per year since its incorporation in 1999.
However, it is important to point out that rising sales online do not directly correlate to
a fall in profits for the UK’s major retailers as many of those firms that operate on the
nation’s high streets are also significant players online. Arcadia Group, Argos, Boots,
Carphone Warehouse, Comet, Debenhams, Littlewoods, John Lewis Partnership,
Marks & Spencer, MFI, Mothercare, and Next all contribute to the IMRG Index.
Roughly two thirds of the retailers interviewed by the London Chamber of Commerce
said their businesses also traded online. More than half of these reported that their
online sales were up on last year (the remainder were retailers operating as part of a
chain of stores who did not have information on how the company website was
performing. No interviewees said that online sales were down).
The losers in the online retail boom, therefore, are smaller, independent retailers
without websites. Higher fuel costs, very cold weather and the fear of terrorism are
likely to make online shopping an increasingly attractive proposition this Christmas.
The Outlook for Winter 2005: Retail Confidence
Despite all the doom and gloom reported in the media, the majority of retailers
interviewed were optimistic about their fortunes. Two-thirds of those questioned said
they were confident about the outlook for their business this Christmas. Eva Saltman,
public relations manager at Hamleys on Regent Street said: “Based on the last
couple of weeks it’s looking very good indeed…the Christmas Lights switch on was
very well attended.” Paola Wray, store manager of Crabtree and Evelyn in Regent
Street, reported that “things are looking good. We’ve seen this weekend [12-13
November] that Christmas is kicking off.” Jean-Francois Berger, store manager at
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Cartier in New Bond Street said: “We are pretty confident even though the economy
doesn’t seem to be booming. During harder times I think people revert back to the
names they can trust.”
According to Jessica Patel, store manager of The Body Shop on Oxford Street: “Two
months ago, we weren’t confident [but] coming up to Christmas we are achieving
sales targets.” Her experience was echoed by another Oxford Street retailer who
said: “There has been a more positive upsurge recently so I am more confident than
two months ago.” A spokesperson for Harvey Nichols of Knightsbridge added: “We’re
quietly confident; we’ve had a couple of good weeks. We feel more confident than six
weeks ago.”
Perhaps as a result of all the negative coverage concerning consumer confidence
and performance this Christmas, four-fifths of interviewees felt that retail as a whole
faced a bleak winter with fewer than one in ten predicting a good Christmas for the
sector. The manager of one designer fashion wear store in Bond Street said there
had been “a general slowdown” whilst Justin Rhodes, managing director of Covent
Garden custom belt outlet Elliot Rhodes Ltd, commented that: “there is clearly an
overstocked situation throughout the retail sector, in particular clothing related.” The
manager of one designer clothing store added: “Due to all the sales, I imagine there
are lots of problems.” One store manager in Carnaby Street said: “the footfall on the
street is clearly down. You can walk into the Tube station at Oxford Circus easily at
the moment; that proves there is something wrong.” However, given that so many of
the interviewees expected their own business to do well, it may be the case that
individual perceptions about the performance of retail in general is driven by bad
news in the press rather than fact and, therefore, that high street sales may be higher
than expected this December.
A third of respondents said that sales this Christmas were up compared to last year.
According to Simon Barnes, head of corporate sales at Fortnum and Mason: “we are
up on last year since we decided to stick to food and entertainment.” However,
although confidence was high amongst those interviewed, many reported that sales
were down on last year and, over all, two-thirds of respondents said sales were the
same as last year or worse. Roughly half of those who said they were confident
about the outlook for their business nonetheless said that sales were down or the
same as this time last year. The manager of one store said he was “Seventy per
cent confident about his business’s performance this year” but went on to say: “This
has been the worst year for about seven years. Christmas normally begins around 7
November but not this year.” A ceramics retailer in Regent Street said it would be “a
challenge” to meet even last year’s performance whilst the manager of a luxury
cosmetics store in the City stated: “we were doing a lot better this time last year. I’m
hoping it’s the calm before the storm.”
The gulf between current performance and overall confidence could be attributable to
a number of factors. Many retailers believe they are doing better than their
competitors and other stores in the same area of a similar kind, even though this is
essentially only a perception of performance. Also, there was a substantial last
minute rush to buy in the final days before Christmas last year and many retailers
may expect a similar rush this year which could boost sales significantly. Similarly,
with the economic conditions having been so poor throughout this year even before
the July bombings many retailers may have lowered their expectations significantly.
The effect that this Christmas is having on employment in the retail sector is mixed.
Nearly three quarters of those interviewed said that they had not reduced staff or
changed their plans to recruit in anticipation of a bad Christmas. A luxury stationery
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shop in the City, for example, has increased staff, as had a nearby luxury cosmetics
retailer. This indicates that luxury goods remain buoyant, especially in the City. This
is perhaps due to the expected corporate bonus bonanza for bankers in the City.
In some areas and for other types of stores, however, the labour market is more
volatile. One fifth of firms said they had reduced staff numbers or cancelled
recruitment plans. One retailer in Chelsea even went so far as to say they had cut
staff “tremendously”. A major retailer on Oxford Street said they had so far avoided
staff cuts but they said they “suspect we will have to next year.” A chemists in the
City said they had “definitely” cut staff but this was “not due to a bad Christmas but
generally. Retailing is not good. We are re-profiling.” A confectionery retailer in the
City said they were still taking on Christmas staff to handle the rush but had not
replaced part-time staff who had left the company. Another retailer, specialising in
ceramics, said they had not cut staff but were “trying to control other costs.”
What is affecting the retail performance on the high street?
Retailers cited a number of factors impacting upon their performance this Christmas,
not least the July bombings which was mentioned by half of all retail respondents as
a factor. One store manager in the City said “since the bombings we’ve all suffered”
whilst a store manager in Regent Street said that “terrorism is the major issue.” Some
retailers said the bombings had a short term impact upon footfall and sales but had
left a large void in their finances for the year. The manager of a clothing store in Bond
Street said: “We did suffer for a maximum of about two weeks. People were wanting
to shop by mail-order because they didn’t want to come into London.”
Location played an important part in determining how the bombings affected trade. A
stationery shop in the City reported that they had seen sales impacted after the
bombings but knew from other store managers in the same chain that the West End
had been harder hit - a fact borne out by Hamleys, who said the bombings were the
“biggest negative” on their performance this year. On the other hand Frederick
Fischer, retail manager at Lalique in Sloane Street, said: “I think the bombing is only
one of the things causing the downturn in business.”
A quarter of respondents said that tourist numbers, both domestic and foreign, were
down and many of those linked the fall to the July bombings. One designer store in
Bond Street said there is “a lack of tourists after the July bombings.” According to
Hamleys: “Visitor numbers were down in the immediate aftermath…it was like
someone turned off a tap.” Groups cited as being notably absent included
Americans, Japanese and those from the Middle East. Interestingly, one retailer
reported a significant increase in the number of Spanish tourists this Christmas which
may indicate that countries recently afflicted by their own terror bombings were not
deterred from travelling to countries that had also been attacked (though the absence
of Americans would seem to contradict this). Other retailers, however, reported that
that they had seen little or no change to visitor numbers at their stores
Two-fifths of retail interviewees also referred to the congestion charge as having a
negative impact on their performance. One general manager in Regent Street said:
“the congestion charge is a problem… a lot of people are shopping out of the West
End” whilst a jewellers in New Bond Street added: “we are victims of the congestion
charge.” Another manager described the charge as “a curse.”
One fifth of respondents cited a poor economy and reduced consumer spending.
According to one store manager on Regent Street: “People are asking for budget
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prices, whereas last year they were just spending.” A wide variety of other factors
were also mentioned, including: the housing market, increased competition from
online retailers, and anticipated tube strikes over Christmas. One retailer even felt
that the Iraq War and the Asian Tsunami had had an impact upon people’s
willingness to shop. According to Eva Saltman, public relations manager at Hamleys
on Regent Street, the weather was an important factor: “Unseasonally warm weather
isn’t conducive to people feeling in the mood for Christmas shopping but the recent
cold snap has helped.”
A small number of central London retailers also said that their business had been hit
by an increase in the number of people choosing to shop in out of town retail
destinations. According to the manager of one glass and cosmetics store: “Even
wealthy customers are going to places like Bluewater, not because of the money but
because you can park hassle free.”
Local factors also had a significant impact upon the performance of individual stores.
One retailer in Kensington said that scaffolding outside their store had reduced
footfall by 40% whilst a retailer in the City said that the closure of a number of offices
near their store meant that they had lost two or three thousand customers. Whilst one
retailer in Chelsea said that road works on the King’s Road had not helped their
business, conversely a store in the West End said: “the recent pedestrianisation of
our street has brought us a lot of new customers.”
Marketing Christmas
Interviewees also mentioned a number of positive factors that were benefiting their
businesses, such as a good performance by their marketing department, a strong
reputation or a particular specialism (such as being a niche retailer), as well as a
good product. According to Denise Davis, manager of Porsche Design in New Bond
Street: “People are coming in on a Sunday now because of the free parking and the
belief that they will be safer.”
When seeking to attract customers this Christmas, retailers prefer to invest in
advertising and marketing rather than offering sales. Of those interviewed, fewer than
one in six were holding or planning to hold sales whereas nine out of ten were
marketing their stores in magazines and catalogues or online. One high street retailer
had road tested their range of promotions earlier in the year to make sure they had
the desired effect and another well-known brand were sending out store-specific mail
outs, indicating a certain level of internal competition between stores within the same
chain. According to the store manager of a City branch of the chain: “we want
customers to spend their money in our store specifically.”
Only a handful of those interviewed said they were holding sales or promotions in
anticipation of a bad Christmas and in many cases stores were running the same
promotions they always did. According to Elliot Rhodes: “No, we have not changed
our sale policy which is one month each season. We had a few in-store offers but
very few. Our product is not overly seasonal so we have not felt like marking down
prices although clearly there is pressure to do so to help reduce stock levels. We
believe that our unique product has protected us a bit in this sense.” A major retailer
on Oxford Street said they had not felt the need to hold a sale as “the customers kept
coming in.”
A number of those interviewed also said that their stores never run sales. One Bond
Street store said: “we don’t do sales,” whilst another added: “[we] do not wish to be a
sales company”.
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Late night shopping
More than four-fifths of those interviewed said that their stores would be offering late
night shopping this Christmas. According to Justin Rhodes, managing director of
Elliot Rhodes: “In general shopping after 6.30pm is sporadic but worthwhile. In this
area there are many people around pre-dinner, pre-theatre etc…and even if they are
not buying they do come in and look which brings them back in the future.” A
spokesperson for Harvey Nichols in Knightsbridge said it was “important and
becoming more important. People are combining it with a bite to eat.” (Harvey
Nichols, like a number of larger department stores, has a restaurant on site).
Hamleys described late night shopping as very important in “attracting people who
don’t have a lot of time. They normally know what they want.”
However, one third of those who did offer late night shopping said that it was ‘not
important’ to the performance of their business. One Bond Street retailer said: “at the
minute it doesn’t make one bit of difference” whilst a store manager in Carnaby
Street said “it is important to be seen to do it.” A number of stores – roughly one-sixth
of the total – said they also offered early morning opening for people on their way to
work, indicating that this is a growing trend. According to one confectioner, late night
shopping is “not as important as early morning. People are willing to come in earlier
rather than staying out later after work.” This could be because some people find the
West End crowded in the evenings in the build up to Christmas, especially in the final
couple of weeks, and they may believe that by going in the morning they beat the
queues. Others would probably prefer to get the chore of shopping out of the way in
the morning rather than have yet another thing to do after they have spent a whole
day at work, especially if the weather is inclement and the nights are drawing in.
Christmas parties and other social commitments also make increased demands on
people’s free time.
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3. Leisure, Tourism and Hospitality
As well as Europe’s retail capital, London is a centre for the leisure, tourism and
hospitality sectors. With a relatively young population compared to the UK as a whole
but with significantly higher levels of disposable income, London’s leisure economy is
the largest in the UK and the fastest growing with 30% growth since 1995. The
capital also accounts for 25% of the UK leisure spend with households spending on
average 40% more on dining out, 12% more on alcohol and 30% more on
entertainment than the UK average. In total, almost 9% of all household expenditure
in London is spent on leisure. (‘Spending Time: London’s Leisure Economy’, GLA
Economics, November 2003)
As a result, London’s leisure economy is also a major employer. With approximately
290,000 employees in the capital (7.2% of total jobs), the sector employs more
people than manufacturing, education or healthcare. Eating and drinking account for
three quarters of London’s leisure activities and employ 122,000 and 58,000 people
respectively. Although entertaining, with 44,000 jobs, comes third in terms of leisure
employment in London, this is actually 40% of all entertaining jobs in the UK. London
accounts for two-fifths of all UK gambling jobs and a quarter of all employment in
visitor attractions. The total market value of the London leisure industry is estimated
at £9.4 billion, with the capital contributing £750million to the UK exchequer in alcohol
duty alone. (‘Spending Time: London’s Leisure Economy’, GLA Economics,
November 2003)
It is perhaps no surprise that Christmas is the busiest time of year in the hospitality
sector. The vast majority of people interviewed saw Christmas as a significant or
massive part of their annual turnover; Barry Burke, the head of marketing and sales
at The Theatre Royal, Stratford East reported that 50% of their box office revenue
comes in over the Christmas period. Similarly, the general manager of the
Connaught Hotel, Anthony Lee, states that “the autumn period from the beginning of
September to 19 December doesn’t stop; it’s been relentless and business has never
been so good.” Another interviewee claimed that a successful couple of weeks in the
beginning of December allowed the restaurant to close for a long holiday period
covering Christmas itself. What is apparent is that with so much at stake over such a
short period of time, a successful Christmas is vital to the general success of the
company.
Christmas Outlook: 2005
Confidence among the hospitality sector is resoundingly high. When managers were
asked to comment on the outlook for their own business, more than seven-tenths of
those asked claimed they were confident of a successful Christmas. This is despite a
general recognition in the sector that this has been a difficult year. Many felt that
Christmas was the time when consumers would ‘move on’ from fears and concerns
that began in the summer. The overall sense of optimism is slightly tempered by a
sense of caution in forecasting success. After a tough year most felt that matters
were improving but they predicted successes with hopefulness rather than assured
certainty. Chris Evans, head of press and marketing at the Royal Philharmonic
Orchestra, reflects the consensus when he couples an optimistic forecast with the
statement: “We are having to work that little bit harder at the moment.”
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Contrasted with the confidence in the outlook for their own business are the figures
that suggest people were far more pessimistic about their sector. This perception
was similarly apparent within the retail sector. Less than four-tenths of those
interviewed felt that this Christmas would be successful for the hospitality sector in
general. Whilst it is perhaps likely that an interviewed representative of a company
may be reluctant to produce a negative or pessimistic forecast for their own business,
these results could also suggest that the general fears about the economic outlook
for the sector are misplaced. Whilst bad events in the year perhaps continued to taint
people’s view of how successful Christmas will be in the sector, others showed
confidence that a real turn-around could be waiting for us this Christmas. “Everything
took a knock in July but a bumper Christmas is expected in the sector.” (Richard
McMenemy, managing director of Rules Restaurant)
Nearly eight-tenths of companies interviewed predicted that this Christmas would
equal or improve upon the figures for last year. Several companies mentioned that
they were taking a “more strategic approach” to Christmas to try and capture the full
potential of the specific Christmas market.
Another positive sign from the survey was that very few firms had felt the need to
reduce staff numbers and many will have to increase their workforce for the
Christmas rush. The good news of a rise in temporary employment over the
Christmas period is only slightly offset by a sense of “caution” and “uncertainty” for
the employment prospects in the New Year that was expressed by a minority of the
companies we surveyed. Overall the hospitality sector wishes to remain loyal to their
staff despite the difficulties they have faced throughout the year.
The Office Christmas Party
Christmas provides a significant boost to the capital’s leisure industry. The sector
clearly values the office Christmas party with nine out of ten restaurants claiming that
they are important or vital to their business at this time of year. Interviewees seemed
to believe that office Christmas parties were both crucial for staff morale and for a
business to be seen as successful and flourishing. Predictions of Christmas success
in the City seem to be reflected by the fact that bookings for office parties are widely
perceived to be up on last year with two thirds of restaurants stating that bookings
were the same or had increased. Only one sixth of businesses interviewed predicted
a downturn in office parties over the Christmas period. Tom Pinchin, account director
for events organisers’ The Ultimate Experience, reports that they are organising more
Christmas parties than ever before.
In November The Scotsman reported on a survey which found that four out of five
employers would not lay on an office Christmas party this year because of fears over
the cost of bad behaviour: “Whether it is for fear of sexual harassment cases,
absence due to hangovers or all-out brawling on the night, bosses have deemed the
festivities more hassle than they’re worth.” Hesitance amongst some managers
follows a number of high-profile sexual harassment cases. In December 2004 the
Royal Society for the Prevention of Accidents and the TUC produced a joint guide to
the festive ‘dos and don’ts’ in the work place which included a recommendation that
mistletoe be banned from offices and company parties. One restaurant interviewed
expressed the concern that “wild” parties posed a serious risk to the restaurant
interior and said “restraint” was needed.
However, this hesitance does not appear to be the case in London this year. A
London Chamber of Commerce survey in October 2005 found that 65% of
- 17 -
businesses planned to throw a Christmas Party this year with over two-thirds of
bosses planning to spend £30 or more per head. Over 60% of bosses surveyed said
that they were personally looking forward to their office party with 72% saying they
considered such parties “a good way to reward hard work” whilst almost 83% thought
they “foster team spirit and company loyalty”. Only 21% of respondents felt that
Christmas parties were “expensive and unproductive” and fewer than 12%
considered them “bad for discipline”. Fewer than one in five bosses, however, said
they would turn a blind eye to staff who failed to come into work the day after the
Christmas party. This is hardly surprising considering the costs involved – in 2004
Norwich Union calculated that the national cost in working hours of the postChristmas party hangover was £65m.
With corporate bonuses expected to be high this year there is likely to be increased
spending on alcohol and parties this Christmas. Larger corporations are unlikely to
be able to deny their staff a chance to let their hair down while many executives will
want to celebrate in style and at length. Stories of City largesse are already filtering
through the media, with bankers celebrating their bonuses at the Umbaba bar a
nightspot in Soho with £333-a-time cocktails created especially for the occasion
whilst one City executive reportedly spent £36,000 buying everyone a drink in
members-only club Aviva. The most expensive drink in London this Christmas is the
Louis XIII Diamond cocktail, available from the Piano Bar of the Sheraton Park Tower
Hotel in Knightsbridge, which costs £4,000 and fuses champagne with Louis XIII
vintage cognac and comes with a one-carat diamond in the bottom. Larger
diamonds, apparently, can be ordered in advance.
The full breakdown of LCCI London Monitor results on office Christmas parties can
be viewed in the appendix at the back of this report (page 26).
Factors Affecting Performance
When asked about positive factors which had affected their performance, most
companies mentioned internal strategies or the strength of their product and quality
of service as the defining factors for their success. The prediction of large bonuses in
the City was also noted as a reason for people being optimistic for the coming
Christmas season with one restaurateur interviewee who wishes to remain
anonymous stating that “the success of City workers… is the bedrock of our
success”. Similarly, Thomas Kochs the food and beverages manager of the Berkeley
Hotel affirms that “the hotel industry is closely linked to the success of business in
general”.
Unsurprisingly, there was more agreement about negative and external factors which
had affected their business this year. The July bombings and the congestion charge
were the two factors most frequently mentioned which were thought to have had a
negative impact upon business in the sector.
Over two-thirds of the survey respondents claimed their businesses were affected to
some extent by the terrorist attacks in July. The responses varied from a small
minority who felt that the hospitality sector was still severely suffering from the July
attacks to those who felt that the bombings had no impact whatsoever upon their
business. A common view is that takings were down considerably for the two-six
weeks after the events and that now spending has increased again in time for
Christmas.
- 18 -
Many of those interviewed mentioned the dent in consumer confidence after the
attacks, but it seems that the lack of confidence is not spread evenly among the
populace. The fall in numbers of people spending money in the London hospitality
sector seems to come from visitors who live outside of London: either foreign tourists
or British people on weekend visits to the capital. Lulie Murray, events manager of
Browns restaurant and bar expresses the view of many when he says that “people
are staying in their locality”. Several of those interviewed believed their London
customer base hadn’t changed whilst there was a definite decrease in foreign visitors
particularly from the United States. However, this view is not maintained across the
sector; referring to American visitors, Anthony Lee, general manager of the
Connaught hotel suggests that “over a period of ten years the USA has experienced
a number of disasters culminating in the attack on the twin towers. In my opinion this
was a real turning point in their resolve to ensure that such atrocities did not disrupt
their plans to travel.” The implication is that everybody is learning to accept the
realities of a world with global terrorism and perhaps the economic impact of terrorist
atrocities will be less than many feared and the terrorists had hoped.
One West End restaurateur said that the July bombings were “not the big problem”
and refers instead to the impact of the congestion charge. Equally, J.A. Darcel the
managing director of Le Beaujolais Club and restaurant claims that the July
bombings had a negative impact upon the business but that “the congestion charge
is worse”. Transport problems and the congestion charge are seen as strong factors
for keeping people away from central London.
Other factors which respondents named as having a negative impact upon the
hospitality sector included over-zealous traffic wardens, the forthcoming ban on
smoking in public places and the need felt by many people to reduce record levels of
debt rather than to continue spending. The problems that have faced the hospitality
sector have led some to assess their marketing and promotional strategies in a bid to
avoid a downturn linked to the factors so far mentioned. Our interviews found that
this strategy was also the approach many retailers were taking.
Marketing and Promotion
A narrow majority of firms in the hospitality sector use formal marketing strategies
and many have radically changed or increased their strategies and campaigns
following a slow year. There are still a significant number of firms, mainly restaurants,
who have no formal marketing strategy and rely on methods such as word-of-mouth
to promote their business. Some restaurants we spoke to have closely linked
themselves with theatres to try and catch the market of visitors who come to eat out
and see a play in the capital.
Whilst being far from the size of the online retail market, there is a definite sign that
online trading in the hospitality sector is increasing. Many firms we spoke to
commented on their new websites and newly launched initiatives to allow bookings to
be made online. Nearly 60% of firms offer online trading which leaves a significant
minority who feel that it is impossible or impractical to accept booking or reservations
online. All of those interviewed reported that online sales were doing well or
increasing. Whilst it may not be anywhere near as lucrative as the online retail
market, the hospitality sector is also beginning to reap the benefits of online trading
by taking bookings over the web. We have heard from traditional five star hotels who
state that their online reservations are booming.
- 19 -
There are some possible factors for the difference in online success between the
retail and hospitality sector. The boom in online shopping may be partly explained by
the fact that many people still view central London with some trepidation due to the
terrorist threat. Also, travelling in London and parking are often viewed as being
stressful and expensive. These factors are clear reasons for why people may choose
to shop from the safety and comfort of their own home but these factors do not
extend to influence the online market in the hospitality sector. If people wish to visit
London for a meal or to go to the theatre or a concert, booking online may not have
any distinct advantage over picking up the telephone to do the same thing. It is still
clear among many restaurants interviewed that they feel happier if a reservation is
made over the phone rather than online.
While some good ideas and strong individual entrepreneurship may be boosting
some restaurants it seems that there is scope for increased support – either from
business organisations, trade bodies or government – to help restaurateurs develop
more advanced marketing techniques or to aid the move online.
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4. Policy Agenda: What London Businesses Want For Christmas
The interviews across all the sectors featured in this report generated a number of
ideas from businesses who felt that the government and the GLA could do more to
help stimulate London’s Christmas economy.
A significant number of both retailers and hospitality businesses wanted to see the
Congestion Charge either scrapped or amended, which is unsurprising given that
many had identified the charge as a major factor undermining their performance.
One recurring suggestion was that the charge be suspended for one or two weeks
before Christmas Eve. According to Colette Zakil, general manager of Wedgwood in
Regent Street: “We need to encourage people into the West End and particularly into
Regent Street which gets less coverage than Oxford and Sloane streets.” Currently
the charge is only suspended for three working days between Christmas and New
Year.
Eva Saltman, public relations manager at Hamleys, said that “the GLA could be a bit
more positive about things like traffic flow. Suspending the congestion charge for a
couple of weeks would be good.” Jean Francois Berger, store manager of Cartier in
New Bond Street, went further still, suggesting the Mayor should “stop the congestion
charge - it is a curse.” These views were echoed by a number of restaurants,
including Hush, Sophie’s Steak House, Il Bordello and Browns Old Jewry.
Businesses in Knightsbridge expressed concern about the Mayor’s proposals to
extend the charging zone to include them. According to Gill Toal, human resources
director at Harvey Nichols: “We are out of the c-charge but we are against being
taken into the zone. People do not need more obstacles to come into London.” There
were also many calls for general improvements to be made to the state of London
transport and parking which is seen as a major factor in dissuading people from
venturing into central London.
Many of those who we interviewed felt the GLA and other bodies were succeeding
well in promoting London as place to visit and enjoy although others felt that more
could be done. In particular were calls for “targeted support” to specific areas or
market sectors that needed a helping hand. The Theatre Royal, Stratford East for
example felt that their location needed greater publicity and support than the well
known and affluent West End theatres. One store in Regent Street suggested that a
Christmas Fair in Regent Street would help promote London and the West End,
whilst another retailer suggested the pedestrianisation of Oxford Street.
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Conclusion
Surveys and reports which suggest that consumer confidence and spending this
Christmas are in meltdown may well prove to be exaggerated. Pessimistic media
reports do not appear to be borne out by interviews conducted by the London
Chamber of Commerce which clearly showed that three-quarters of leisure
businesses and two-fifths of retailers were confident of a good Christmas. Few
businesses had reduced staff and only a handful were offering sales or special
promotions that they would not otherwise have held, though many business leaders
have admitted they have had to work harder this year to achieve these results. A
number of hospitality businesses expected to be kept busy by the seasonal rise in
partying. Many retailers were also working hard, offering not just late night shopping
but also early morning opening, often with very positive results.
There were, however, some notable differences between how the two halves of the
Christmas economy are shaping up this winter. Hospitality businesses are performing
better, are less likely to have reduced staff numbers and are more confident about
their prospects than retailers. This performance gap between the two sectors was
reflected in the comparative willingness of leisure and hospitality interviewees to go
on the record versus the reticence of most retailers. Only two-fifths of retailers
interviewed were willing to have their business named directly whilst three-fifths of
leisure businesses happily went on the record.
A major factor in this apparent discrepancy between sectors could be the rise in
online shopping. The IMRG has estimated that if the UK's 26,000 online shops were
bricks and mortar, they would form a high street 50 miles long, with five million
products for sale. This virtual high street is bound to have a major impact upon sales
across the UK, not least in the capital where retail is such a significant part of the
London economy. By comparison there is no virtual competitor to a restaurant or bar.
The customer may be able to read the menu or reserve a table online but they
cannot adequately recreate the experience at home.
Other factors have also played their part in undermining business performance and
encouraging speculation that this Christmas will be a bad Christmas. The July
bombings, the congestion charge and a general economic downturn were all cited by
interviewees as having a negative impact upon their business. While the bombings in
particular featured prominently in discussions, most of those commenting concluded
that their impact was significant but relatively short-lived.
Based on these detailed interviews with business leaders, the London Chamber of
Commerce is calling for the following:
•
The congestion charge should be suspended for the last full week ahead of
Christmas every year to encourage shoppers, diners and revellers into central
London in the most pivotal trading week of the year. (This year that would be
the week commencing Monday 19 December 2005 and next year it would be
the week commencing Monday 18 December 2006). We believe that the
Mayor has implicitly conceded this point by suspending the charge in the vital
three shopping days after Christmas, thereby establishing the precedent of a
charge-free West End during crucial shopping periods.
- 22 -
•
More training and support, led by either central or regional government, to
help retailers and hospitality businesses develop more advanced marketing
skills.
•
Urgent measures should be put in place to help smaller, independent retailers
establish online trading.
•
Visit London, in conjunction with London retail groups, should develop and
promote the concept of weekday early morning shopping in key areas such
as the West End, Knightsbridge and the City.
- 23 -
Appendix 1
London Office Christmas Parties Survey 2005
Questions on office Christmas parties were included in the LCCI’s London Monitor
Survey in Autumn 2005. The results of the survey were as follows:
Does your company plan to throw a Christmas Party this year?
65.2%
Yes
34.8%
No
Office Christmas parties…
Are a good way to reward hard work
Foster team spirit and company loyalty
Are bad for discipline
Are expensive and unproductive
Yes
71.6%
82.8%
11.7%
21.4%
No
28.4%
17.2%
88.3%
78.6%
Are you personally looking forward to attending your office Christmas party?
60.8%
Yes
39.2%
No
How much will your firm be spending (per head) on your Christmas party?
12.4%
Don’t Know
6.2%
£10 or less
14.2%
£10-30
35.4%
£30-50
19.4%
£50-100
12.4%
More than £100
Will you or your firm be turning a blind eye if any staff failed to turn up for work
the morning after the office party?
19.4%
Yes
40.3%
No
40.3%
Not applicable
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